Columbus, Ohio
June 3, 2008
New research suggests that the
average supermarket shopper is willing to pay a premium price
for locally produced foods, providing some farmers an attractive
option to enter a niche market that could boost their revenues.
The study also showed that shoppers at farm markets are willing
to pay almost twice as much extra as retail grocery shoppers for
the same locally produced foods. Both kinds of shoppers also
will pay more for guaranteed fresh produce and tend to favor
buying food produced by small farms over what they perceive as
corporate operations, according to the study.
“Our conclusion is that if a
farmer wants to consider producing food for local distribution
and marketing it locally, there are people who are willing to
pay more for it,” said
Marvin Batte, a co-author of the study and the Fred N.
VanBuren professor of
agricultural, environmental and development economics at Ohio
State University. “We are not saying that we should be
producing all of our foods locally, just that this may be a
viable, profitable activity for farmers.”
And what’s good for farmers
also benefits consumers in this case, said Batte, director of
the research project.
“This is an indication that
certain groups out there value locally produced food and if
farmers deliver that, it makes these consumers happier, so it’s
good for them, too,” he said.
Most of the survey was
conducted in late 2005. Batte said the findings – and his
contention that not all food should be produced locally – still
apply today, even in the face of rising fuel and food prices.
Many food crops that thrive in specific types of climates cannot
be efficiently and affordably produced for local distribution
elsewhere. And, he said, those who buy local food to support
nearby growers likely would be even more motivated to lend that
support in a flagging economy.
The study is published in the
May issue of the
American Journal of Agricultural Economics.
The researchers surveyed
shoppers at 17 Midwestern locations, including seven retail
grocery stores, six on-site farm markets and four farmers’
markets hosting sellers from multiple farms. The researchers
used data from 477 surveys.
The survey presented shoppers
with two product options. Both were baskets of strawberries, but
they were presented under 80 combinations of price, farm
location and farm type. Some scenarios also included a freshness
guarantee. After presenting the options, the researchers asked
shoppers which basket of strawberries they would buy.
“Statistically, we sorted out
what explains each person choosing one basket over the other. We
were able to determine how important price was, how important
where the strawberries were produced was and whether the
freshness guarantee was a factor,” Batte said. “Basically what
made the biggest difference was local production.”
In the study, local production
meant the berries were grown within Ohio.
The average retail shopper was
willing to pay 48 cents more for strawberries produced locally,
and shoppers at farm markets were willing to pay 92 cents extra.
With the base price for a quart of berries set at $3, farm
market shoppers were willing to pay almost a third more for the
local produce.
The freshness guarantee also
held meaning for shoppers. If shoppers were promised fresh
produce that was recently harvested, farm market shoppers were
willing to pay 73 cents extra and retail shoppers indicated they
would pay 54 cents more.
The researchers also tried to
test shopper interest in supporting small vs. large farms by
naming one fictional berry producer “Fred’s” and the other
“Berries Inc.” Shoppers in grocery stores were willing to pay 17
cents extra for a quart of berries from Fred’s, and farm market
shoppers were willing to pay 42 cents more for the perceived
small-farm produce.
“We suspected people who go to
farmers’ markets go there for a reason, because they are willing
to pay more, hunt it down and travel there. But we also found
that the typical shopper in a retail grocery store is willing to
pay more, as well. And in fact, we’re seeing that grocery stores
are figuring this out by prominently labeling locally produced
food,” Batte said. “So we were trying to see if that group of
people who shop at retail groceries are willing to pay X amount,
and determine what that amount is.”
Though the study was conducted
in Ohio, Batte said the findings could easily extend to the rest
of the country. However, the definition of local would be likely
to differ in California, a large state with multiple growing
regions, and New England, where several small states are
clustered closely together.
“The shoppers are expected to
be there in each kind of shopping venue nationally, but ‘local’
would need to be defined more precisely for various regions,”
Batte said.
Though not all farmers would be
able to set up a niche operation to grow and sell their produce
to nearby consumers, Batte said some smaller farm owners could
consider adding hand-harvested local production with the
expectation that they can charge a premium for that produce.
“Farmers could actually be a
little less efficient on the production side and still be more
profitable on the revenue side if they can capture that premium
price,” he said.
This work was supported by the
National
Research Initiative of the
U.S.
Department of Agriculture, the Fred N. VanBuren Program in
Farm Management at Ohio State, and the
Ohio Agricultural
Research and Development Center.
Co-authors of the study were
graduate student Kim Darby, outreach program leader Stan Ernst
and Professor Brian Roe of Ohio State’s Department of
Agricultural, Environmental and Development Economics. |
